Coo Insights

COO INSIGHTS

BEYOND MAINSTREAM

3D PRINTING Lucrative business in dynamic niche markets

DREAM FACTORY Intelligent machines: Yesterday's Hollywood vision is today‘s reality

CYBER- CRIME Strategies to guard against attacks from the internet INDUSTRY 4.0 BMW Board member and CEO designate HARALD KRÜGER on the potential of connectedness – AND the hard facts about going digital WHAT MAKES A COO AND A COMPANY SUCCESSFUL IN THE CONTEXT OF INDUSTRY 4.0?

THINK ACT // COO INSIGHTS 0INDUSTRY 4.0 COVER PHOTO: THOMAS DASHUBER; ILLUSTRATIONS: BEN KIRCHNER should therefore definitely spend a few years as COO at an SME. at COO as years afew spend definitely therefore should you positions, management in career ambitious an targeting are you If markets. uncertain in volatile, successfully very operate to them many of helps already approach pragmatic their cause Tool Industries. Machine the of Association European the CECIMO, of President as serves also He CINETIC. FIVES company engineering industrial French URING JEAN-CAMILLE JEAN SAVVY!" "TACTICAL um whe decide ultimately will what –and COO asuccessful makes what is That intelligence. relational and organizations modular in ibly flex act to ability the savvy, tactical and vision Astrategic ment. manage of style anew is need wealso What climate. business Indu future. in the efficient and agile be to weare if vital are fly the on resources specialized integrate to ability the and skills Multidisciplinary technologies. and techniques new implement to weneed skills the cultivate We must people. educated highly our of strengths the leverage to is issue critical the path, this take to wewant If time. same the at costs reduce and flexibility and quality enhance They capabilities. vative inno our improve to us compels change of complexity and pace sheer Yet the tomorrow. neglect to us leads –and today and yesterday line between the on trained sights our keeps dures proce reporting strict and KPIs on Focusing restrictions. impose possible. 4.0all that makes Industry market. to time and flexibility quality, lifecycles, product shorter chains, value globalized customer, individual the to tailored products in lies markets competitive in fiercely SUCCESS TO KEY THE We can all see that existing models and standard procedures procedures standard and models existing that all see We can - We have long since left a stable universe behind us. But But us. behind universe a stable left We since long have control. process better way to the clear 4.0 tools Industry siz the stry 4.0 may not be enough to make up for an unstable an unstable make up for to 4.0 enough be may not stry - CAMILLE URING CAMILLE ed enterprises (SMEs) are a good training ground, be ground, training (SMEs) agood are enterprises ed r Industry 4.0 is to be or not to be. Small and medi Smalland be. to not or 4.0be to is r Industry

is COO and member of the Executive Board of of Board Executive the of member and COO is THINK ACT

INDUSTRY 4.0 Q&A // COOINSIGHTS Europe". The future has already begun. already has future Europe". The "made in production of competitiveness the for opportunity 4.0 ahuge is economy. Industry network in the allies find and innovation digital for case a business build KPIs, new determine steady and facilities proven potential; the recognize to fail who customers influence; and jobs their losing about worried are who employees overcome: be to need hurdles institutional and barriers Mental paths. new tread to courage the need Top managers direction. and focus company the gives that aroadmap developing and complexity overall the grasping vision, adigital upfor standing topic, this of urgency the communicating clearly means Leadership role. ship rising. is inno model business for demand the best, the among being continue to want they Because inall industries. panies com on pressure positive we see speed, same the at moving in an inter act and think to ability its and creativity ment‘s opportunities. resultant the tackled and identified have Yet all companies not in Europe. manufacturer large every practically at huge issue a is and services, logistics in production, processes of tion ma the of level the to down – drill integration – vertical step next the does then Only processes. business their of integration zontal hori the on working feverishly are companies that we know associations, and MANAGEMENT WITH TALKS ON BASED THOMAS RINN THOMAS TO LEAD!" COURAGE "THE con Global Head of Operations Strategy, Roland Berger Strategy Consultants. Strategy Berger Roland Strategy, Operations of Head Global RINN THOMAS s nected way is what matters now. Although not everyone is is everyone not now. Although matters what way is nected The COO thus has the chance to assume a decisive leader adecisive assume to chance the has thus COO The Manage driver. innovation apowerful with dealing We are chi nes. Industry 4.0, the comprehensive inter 4.0, comprehensive the Industry nes. is Senior Partner and – jointly with Max Blanchet – Blanchet Max with –jointly and Partner Senior is - sta te processes. It will be crucial to to crucial be will It processes. te con vat nec ions ions

8 Radical integration

HUMANS OR MACHINES?

WHO WILL CONTROL TOMORROW'S PRODUCTION 50

THINK ACT // COO INSIGHTS CONTENT 24 "Leaner, INDUSTRY 4.0* faster, more stable"

6 STATEMENTS 24 INTERVIEW 37 EASTERN PROMISE Is 4.0 fact or fiction? How digitization is changing car Preparing a tour de force: China Politicians and business production: an interview with wants to become a high-tech leaders have their say Harald Krüger, Chief Production supplier Officer at BMW and CEO designate 8 COVER STORY 40 CYBER-CRIME Industry 4.0: How fully digitized 32 KPIs How businesses can guard production is revolutionizing Measuring the fourth industrial themselves against attacks the value chain revolution from cyberspace

19 PREQUEL 34 3D PRINTING 43 INTERVIEW Dream factory: Hollywood Where the really interesting Airbus' Chief Technology Officer Jean pioneers 4.0 business models are springing up Botti on new security requirements

4 THINK ACT // COO INSIGHTS INDUSTRY 4.0 40 The invisible threat * A FACTORY UNTO ITSELF INDUSTRIAL REVOLUTION IN FOUR ACTS 43 "Greater vulnerability" 1.0 End of the 18th century: In England, a STEAM ENGINE powers a loom for the first time – the dawn of mechanical production. 2.0 End of the 19th century: ELECTRIFICA- TION enables mass production to be broken down into specialized activities on the production line – in American abattoirs to begin with, and later in the auto industry. Quality improves, prices decline. 3.0 50 years ago: Aided by microelectronics and IT, and in particular by programmable logic controllers, the AUTOMATION of production gains ground. Machines take ever more complex tasks out of human hands and raise productivity. 19 More science than fiction 4.0 Today: Cyber-physical systems (CPS) are central to the DIGITIZATION of production. Workpieces, tools, production plant and logistics components with embedded software are all talking to each other. Smart products know how they are made and what they 46 COO WORKSHOP will be used for. Customized mass production Opportunities spawned by – in "segments of one" – is on the march on digitization: projects and affordable terms. Nor does the creation of publications value still end at the factory gate. Smart, interconnected products that can stay in touch with the manufacturer even after they 50 34 FAMOUS LAST WORDS Print-ready are sold open up the possibility of new ser- Insights and prospects as seen by vices and business models. Producers are futurologist Andreas Neef offering value-added services to their customers. Companies no longer sell an engine: They sell thrust – including preventive mainte- 51 SERVICE nance, for example. Trust in a secure and reli- Publishing information able technological infrastructure is allowing Online publications deregulated and highly competitive markets to emerge.

THINK ACT // COO INSIGHTS 5 INDUSTRY 4.0 THERE WON'T BE MANY "4.0" WHO BUILD GREENFIELD – INDUSTRY 4.0 FACTORIES. FOR THIS REASON, ONE FACT OF THE KEY THEMES OF INDUSTRY 4.0 WILL BE OR RETROFITTING EXISTING FACTORIES AT LOW COST. Dr. Thomas Kaufmann, Vice President Corporate Supply Chain, FICTION? Factory Integration, Infineon Technologies (… AND WHERE DO WE GO FROM HERE?)

THE COMPANIES — AND NATIONS STATE- — THAT ACT NOW TO SEIZE ITS MENTS PROMISE WILL THRIVE IN THE 21ST CENTURY. THOSE WHO ARE DEVOTED TO INCREMENTAL The internet of things CHANGE AND FAIL TO ENGAGE IN is a huge transformative SMART MANUFACTURING WILL RAPIDLY FALL BEHIND. development. Sujeet Chand, Chief Technology Officer, David Cameron, British Prime Minister Rockwell Automation

LIKE ALL REVOLUTIONS, INDUSTRY 4.0 IS EFFECTING A REDISTRIBUTION OF WEALTH. Tom Comstock, Vice President of DELMIA Strategy & User Experience, Dassault Systèmes

6 THINK ACT // COO INSIGHTS INDUSTRY 4.0 STATEMENTS We need not just INDUSTRY 4.0 scientific excellence, IS LIKE AN INTERNATIONAL not just detailed RACE. TEAM GERMANY solutions here and HAS LINED UP, BUT JUST there, but ideas we BECAUSE YOU START FIRST can earn money with. DOESN'T NECESSARILY MEAN YOU'LL BE THE WINNER. Prof. Dr.-Ing. Dr. h.c. Detlef Zühlke, Scientific Director, German Research Prof. Dr. Dieter Wegener, Center for Artificial Intelligence Head of Advanced Technologies and Standards, Siemens

WE NEED THE KIND OF START-UP CULTURE YOU SEE IN AMERICA. Eberhard Veit, Chairman of the Management Board, Festo

We must not let things get WHEN EVERYTHING AND EVERYONE to the stage where Google BECOMES CONNECTED, AND manufactures products such COMPLEXITY IS FREE AND INNO as cars and televisions and VATION IS BOTH DIRT-CHEAP AND European companies are left CAN COME FROM ANYWHERE, to play the part of suppliers. THE WORLD OF WORK CHANGES. Günther Oettinger, EU Commissioner for Thomas Friedman, author and journalist, Digital Economy & Society New York Times

In Industry 4.0, service isn't Virtual factory, about making repairs. It's about the promise of real value. avoiding defects. Arnold Stokking, Director Industrial Innovation, Dr. Jochen Schlick, Head of TNO, Netherlands Cyber-Physical Systems, Wittenstein

THINK ACT // COO INSIGHTS 7 INDUSTRY 4.0 COVER STORY INDUSTRY 4.0 RADICAL INTEGRATION Products and processes, data and services, factories and methods: INDUSTRY 4.0 means non-stop communication – on all levels. That is revolutionizing the way value is added and creating room for new business models.

THINK ACT // COO INSIGHTS 9 PETER KRÄMER ILLUSTRATION: ILLUSTRATION: INDUSTRY 4.0 COVER STORY INDUSTRY 4.0

every level – in product portfolios, in cus- sibility lies with IT in the form of integrated tomer and supplier relationships, in pro- manufacturing execution systems (MES) cess technologies, in IT systems and in and production machinery, electronic kan- production locations. Distributed organi- ban systems, automated quality control zations with largely autonomous units are via RFID labels, data mining and so on. the best way to stand up to so many differ- "On the other hand, we concentrate on ent demands. giving our people a broad array of skills To put that another way: Industry 4.0 is with which to master ever-changing pro- bringing fundamental change to competi cesses and technologies." tion in today's "VUCA" world of volatile, Pirelli sees the Modular Integrated uncertain, complex and ambiguous mar- Robotized System (MIRS) that enable it to C kets, because value chains are contract- condense the 14 traditional phases of tire ing. Two of the key aspects currently in production into just three as one aspect of ould the concept of "Industry 4.0" – the transition (see also page 17) are: its next-generation IT landscape. The MIRS phrase coined by the German government SPEED: Product development-to- robots deployed in Europe and the USA as part of its strategy to computerize the market and order-to-shipment lead times produce tires seamlessly, without inter- manufacturing sector – become as popu- are growing shorter. Outages too are ruption. There is no need to add semi lar and relevant as "Web 2.0"? It was being reduced as remote monitoring and finished products, no interim stocks are Dutch Professor Willem Jonker who first predictive maintenance eradicate expen- needed and less energy is consumed. The threw this question into the ring. The sive downtime for machinery and indus- average lead time from raw material to mathematician and information technolo- trial plant. finished product has been cut in half. gy expert at the European Institute of FLEXIBILITY: Digitization, connected- Every part of the process is controlled by Innovation and Technology (EIT) has been ness and virtual tool planning open the integrated software, from robot motion to commissioned by the European Union to door to custom-tailored mass produc- raw material replenishment, from tire size apply his mind to the computerization of tion. Very small series – batch sizes of selection to vulcanization and quality con- industry, the intelligent integration of re- one, ultimately – can be produced and trol. The Mini Cooper S was one of the first search and business – and how a better sold at a profit. cars to be fitted with tires made in this growth and innovation policy could help The bottom line is that resources are way; the new Bentley was the most recent Europe to become more competitive. used more efficiently while people and model to follow suit. Pirelli's productivity Jonker's conclusion? For now, Industry 4.0 machinery work far more productively. has jumped sharply. is still seen as little more than a buzzword. Introducing Industry 4.0 has brought Like Web 2.0, however, it neatly encapsu- COSTS DOWN, similar success to motorcycle producer lates the sheer force with which digitiza- MARGINS UP Harley-Davidson. The venerable US com- tion is permeating every aspect of manu- pany manufactures its 1200 Custom and facturing routine and turning the relation- Tire manufacturer Pirelli has already taken Street Bob models at a factory in York, ships between producers, suppliers and the plunge into integrated production. Tire Pennsylvania, 100 miles north of Wash- customers on their head. This force has production is, essentially, high-volume ington. Customers use the Bike Builder to the potential to raise companies – and customization. Gregorio Borgo, General design their own customized machine on- with them whole economies – to a new Manager Operations, refers to the Italian line and then order it from a dealer. This level of competitiveness. company's culture of innovation as "open data is accessed not 21 days (as in the The global battle to add value is inten- and cross-functional", stressing that In- past) but a mere six hours before produc- sifying – and that in markets that are grow- dustry 4.0 is being driven from all quarters tion begins. That gives customers the flex- ing ever more complex and less predict- within the group. "The Pirelli Group's facto- ibility to make changes – to the wheels, able. Companies must call their business ries are increasingly digitized in their func- seats, handlebars, position of the foot models into question, and then do it tions, processes and machine mainte- rests, paintwork, optional safety features, again. The demands placed on speed and nance." The higher the class of car, the you name it – right up to the last minute. the sheer diversity of product variants are higher the demands placed on the tires. Harley-Davidson has significantly increasing, even though it is often not pos- "In this context, talking about manufactur- shortened its lead times with this strategy, sible to accurately predict likely sales vol- ing, we need a balanced organization," and production is completed in a single umes. Flexibility is thus an imperative on Borgo says, noting that part of the respon- day. On the automated production line,

10 THINK ACT // COO INSIGHTS INDUSTRY 4.0 A NEW WORLD THAT ADDS *EXAMPLE: CAR INDUSTRY ( ) From raw metals MORE VALUE to sunroofs COMPONENT YESTERDAY'S SUPPLIER, TODAY'S PRODUCTION Metalworking Supplier: Brinks Metaal PARTNER*: THE CHANGING Customer: Power-Packer SUB-ASSEMBLY Hydraulics ROLES OF INDUSTRY PLAYERS Supplier: Power-Packer Customer: Edscha

Value chain SYSTEMS INTEGRATION Complete sunroof system Supplier: Edscha 1980 2000 2020 Customer: BMW

Outsourcing

Research & Design & Prototyping & Component Systems Sales & development planning industrialization production integration service

1980 2000 2020 Component Outsourcing of Integrated outsourcing links in value supplier TRADITIONAL CHANGING ROLES: THE FUTURE ROLE SPLITTING: Supply chains become IS NOW: Suppliers contribute more complex and OEMs are "lean", individual parts OEMs farm important suppliers share to production. production steps out responsibility for to specialists. complex systems and processes. Sources: Brainport Industries, Roland Berger

THINK ACT // COO INSIGHTS 11 INDUSTRY 4.0 12 THINK ACT // COO INSIGHTS INDUSTRY 4.0 COVER STORY INDUSTRY 4.0

humans and machines work hand in hand production process and where they will be (so to speak!), developing models in 3D, deployed in future. As a result, they active- planning and monitoring every step online, ly support both production and documen- visualizing work instructions on-screen. tation. This vision of seamless, connected The costs are going down, the margins are production is rooted in cyber-physical sys- going up. tems (CPS): workpieces, tools, production Success stories such as these are put- plant and/or logistical components that ting wind in the sails of Industry 4.0, which are hooked up to the internet via embed- goes by a variety of names: "advanced ded (software) systems. They perceive and manufacturing" in the USA and the UK, influence the surrounding environment, SMART FACTORIES "les usines du futur" (the factories of the build distributed networks and optimize ARE LIKE future) in France, "made different – facto- themselves autonomously. Their virtual SOCIAL NETWORKS ries of the future" in Belgium, and "smart model of the real world is thus constantly Humans, machines industries" in the Netherlands. Former SAP being updated – in real time or near-real and materials chief Henning Kagermann, one of the peo- time – with the aid of up-to-the-minute communicate and ple who originally coined the term Industry data. At the same time, staff control the interact in real time. 4.0, hopes Germany will lead the way. An- production system via multimodal inter- gela Merkel allegedly sets great store by faces and augmented reality applications. retaining the original German spelling – Cyber-physical systems usher in the next Global production facilities "Industrie 4.0" – even in English publica- level of decentralization: at the level of A network of global production facilities is the beating heart of Industry 4.0. Intimate tions to make sure everyone knows this objects in the factory and organization. interaction with partner firms boosts "brand" was made in Germany. The issue Smart factories' interfaces to smart mobil- profitability thanks to tighter coordination at stake is nothing less than global innova- ity, smart logistics and smart grids make cycles, for example, enabling production processes to be constantly optimized tion and market leadership. them a pivotal element in tomorrow's in- and adjusted. Kagermann, now President of Acatech, telligent infrastructures. When two or more Empowered machine operators Germany's National Academy of Scie nce firms are linked together by this kind of Augmented reality: This technology gives and Engineering, is much in demand as a information flow, that changes the way the people who operate machines an speaker, even beyond Germany's shores. players interact in the network economy. enhanced, virtual overview of production, "The Chinese, eager to press ahead with People are already talking about the next helping to accelerate maintenance and repair work, for instance. Armed with automation, came to us first," he says, "fol- level of "coopetition" – of cooperative smartphones, tablets and data glasses, lowed by the Dutch, who wanted to know competition in a context of maximized workers become "augmented operators". how to get so many different players to- specialization. Social machines gether around one table. After them the So is this the brave new world ahead Social machines are knowledge-based, Americans and Britons wanted to increase of us? Not everywhere. Not yet. Because sensor-assisted and geographically manufacturing's share of their economies." that would require companies to kiss distributed elements of autonomous Kagermann fully understands why interest goodbye to the traditional tools of produc- production systems. They share newly acquired information with other machines. is so pronounced: "The vision of Industry tion management. One of these is Micro- No additional configuration is needed. 4.0 is simple but compelling." soft Excel, the most widespread piece of Smart products software in manufacturing execution sys- Smart products can be identified and STRIKING A NEW BALANCE tems (MES) and hitherto an integral part located at any time. All information BETWEEN HUMANS of both production and resource planning about the course of production is stored AND MACHINES and the evaluation of process data. in the product itself – in RFID chips, for example. Smart products control Depending on firms' willingness to invest, their own production processes. Industry 4.0 might sound like the latest many experts believe that this situation Virtual production production software release, but it is so will change significantly between now and A digital model of the real-world factory much more than a straightforward update. 2030. Industry 4.0 is a dynamic process links all the people, machines and materials It creates a new and radically integrated of evolution. Yet if revolutionary change is together and visualizes the processes production system. Humans, machines the prize at the end of the evolutionary currently in progress. Within this virtual production environment, data can be analyzed and resources communicate directly with path, now is the time for pioneers to take and future statuses simulated in order to each other. Smart products know their the first bold steps. Notwithstanding, optimize production.

THINK ACT // COO INSIGHTS 13

ILLUSTRATION: PETER KRÄMER PETER ILLUSTRATION: INDUSTRY 4.0 COVER STORY INDUSTRY 4.0 many companies are still hesitant, want- now plugged the gaps in its data and com- the here and now. The strands of 50 dif- ing to know what technologies are even munication streams with QR codes, smart ferent pilot projects at the Bosch Group ready for market yet? workpiece carriers, tablet PCs and digital come together in his hands. His response Jochen Schlick believes that is the planning boards. Integrating the legacy to the question of services fits perfectly wrong question: "Industry 4.0 is not a new systems turned out to be the biggest chal- with his basic credo: Industry, he says, technology," the man in charge of the for- lenge, but Wittenstein was clearly up to must rid itself of the notion that you can ward-looking discipline of cyber-physical the task. Its success was made possible know today exactly what sensors a ma- systems at Wittenstein AG says. An engi- by a network of 22 external partners who chine will need in five years' time. Rather, neer by trade, Schlick recently moved from were responsible for mechanical aspects, we must build a platform for developing the German Research Center for Artificial software, and integration in the cloud. solutions that can adapt to the future. Intelligence (DFKI) to one of the world's Schlick's arguments are sober and Häuser says that, in individual projects leading manufacturers of mechatronic rational, but his mindset is to challenge where the initial outlay exceeds immedi- drive systems. The basic technologies be- customs. He acknowledges that compa- ate cost reductions or effi ciency gains, hind the internet of things have been nies everywhere have long been seeking commercial cost/benefit calculations are around for some time, Schlick argues: au- to optimize production. Nor have their often misleading. Far-sighted managers tomatic identification, embedded sys- goals changed along the way: Everyone know enough to trust that data links will tems, broadband wireless networks, digi- wants punctual, accurate delivery, lower one day yield benefits in unexpected tal control and communication. He adds costs and better quality. On a method- places, too. that promising applications are now ological level, the paradigms of lean pro- But do lots of sensors mean lots of emerging at the points where information duction have proved useful, he says. Yet benefits? No, the Bosch manager categor- from the material world can be captured he is adamant that the theoretical possi- ically refutes this argument. What compa- efficiently and processed effectively in the bilities inherent in the process chain have nies do need, he says, is a vision of full digital realm. To put that another way: often not been realized. Eliminating these data transparency that looks beyond the What used to be separate information inefficiencies, he says, is where compre- straitjacket of project accounting. Sensors sources are now becoming compatible. hensive digitization of the value chain re- now cost only a few cents, and readers Making things compatible sounds veals its real potential. Industry 4.0 means won't break the bank either. Häuser has no easy enough. Yet having seen many com- tackling the goals of maximizing cost and doubts: "Low-cost solutions will unleash panies fall at precisely this hurdle, Schlick resource efficiency in production in a dif- the full force of Industry 4.0." recommends looking for "media disconti- ferent way: not with more automation or nuities in routine manufacturing practice" better components, but with fewer inter- TREND TOWARD – the points at which inefficiency is tangi- faces to break up the data stream. RETROFITTING ble. Some time ago, that was the case at Schlick says the flow of information Wittenstein's intralogistical set-up and that accompanies the movement of goods Market observers perceive a strong trend production planning, two areas in which delivers "recommendations for action by toward retrofitting, with companies up- the masters of their craft were still working well-informed decision makers" – rather grading older equipment rather than rush- out the fine details on paper. like SatNav systems do for drivers. Users ing to splash out on brand-new 4.0 pro- do not even have to fully understand every duction plant. That helps them protect past INEFFICIENCY – aspect of this kind of driver assist system. investments with lengthy depreciation pe- A THING OF THE PAST There is thus a very real possibility that the riods. And this reasoning alone proves the knowledge needed to interpret data might point: Industry 4.0 is not about radical, The company manufactures products that be beyond the core competency of the overnight upheavals. Its technologies and are used in aircraft engines, oil-drilling users: a new market for service providers possible implementations are filtering platforms and pacemakers. The failure to who support the management of corpo- down into the economy only gradually. synchronize workpiece transportation pro- rate processes. The ABB Group, a manufacturer of en- cesses with actual production used to Bernd Häuser, Head of the Corporate ergy and automation systems with a global waste time and resources. The lack of a Department for Manufacturing Coordina- reach, expects the traditional automation digital model of production planning tion at Bosch, believes that the question pyramid to essentially remain in place. A meant that management didn't have of what exactly these services are will not 4.0 network will merely be superimposed access to order-, line- or machine-specific become relevant until further down the on it, adding access to production at data at any given time. Wittenstein has line. His attention is focused squarely on certain points. Read access – for data

14 THINK ACT // COO INSIGHTS INDUSTRY 4.0 GLOBAL COMPETITION analysis and troubleshooting purposes, for machinery itself, she says, roughly half of example – will be granted at these commu- How much governments all companies have no really useful data nication nodes. Write authorizations in the are forking out in the race as a valid basis for value-added services. control system enable central calibration for the future of production. What data they do have is not collected and maintenance services to be made often enough, is not stored or cannot be available during live operation. Service UK converted. Like in the good old days, the 312 million euros have been channeled into technicians do not have to wait until only solution is often a brisk walk to the Britain's Advanced Manufacturing Supply Chain defects occur before they go hunting for initiative since 2011. The Department for nearest printer. the causes: The plant recognizes its own Business, Innovation and Skills launched an That is why Europe is working flat out status, reports and analyzes imminent additional 127 million euro fund in spring 2014. to craft a harmonized data structure and damage and orders replacement parts. The latter money is being used to advance shared standards that will vastly simplify research and development in the automotive This avoids expensive outages and yields and aviation sectors. machine-to-machine communication. huge gains in efficiency. Like many other "Plattform Industrie 4.0", a German orga- companies, ABB already supplies hard- France nization that brings industry associations, President François Hollande has announced ware and software components for remote a 3.7 billion euro package for "La Nouvelle companies and research institutes togeth- diagnostics and predictive maintenance. France Industrielle". Selected industry projects er, is currently plotting a "standardization Weidmüller Interface GmbH & Co. KG, will be subsidized in 34 government-backed roadmap". In the USA, the Smart Manu- a producer of control and connectivity plans of action, including "les usines du futur" facturing Leadership Coalition is tackling ("the factories of the future"). France has only technology and measuring and monitoring 35,000 production robots, compared to 65,000 the same issues. New standards will open systems, is another Industry 4.0 system in Italy and 150,000 in Germany. new markets. supplier. The latter ensure that an injection Industry 4.0 will stand or fall by these molding machine, for example, can beam Germany efforts at standardization. Once an open Federal government is pumping 200 million its oil pressure and operating temperature euros into "Plattform Industrie 4.0" within the system is up and running, every entrepre- data straight onto the internet. Machine framework of its "Hightech-Strategie 2020" neur can join in the game. Metcalfe's law operators see the data in the browser on action plan. The aim is to bundle the expertise of should probably then apply. This law states their tablet or smartphone, use it to visual- research organizations, the leading mechanical that the value of a communication system engineering associations and the ITC and ize issues, diagnose problems, quickly electrical/electronic engineering industries. grows in proportion to the square of the spot anomalous patterns – and can thus number of connected users. The more pro- keep the machines running smoothly. Europe duction becomes interconnected, the Between now and 2020, the European Markus Köster, an engineer at Weid- Commission will invest 1.15 billion euros in more the entire value chain will be worth. müller's technology development unit, is Factories of the Future (FoF), a private/public Fifty billion "intelligent objects" could be matter-of-fact: "Monitoring is possible, but partnership initiative. SMEs in particular are to communicating with each other as early as there is not so much demand for automat- see their technological manufacturing base 2020 – ten times as many as today. Origi- strengthened by adaptable machines, innovative ed readjustment. Not yet," he stresses. nally a forecast aired in its own interests by materials and modern IT for production Why is that so? Speaking from experi- environments. network equipment provider Cisco, this ence, Britta Hilt, Managing Director of number is now widely held to be plausible. Saarbrücken-based IS Predict GmbH, USA The Obama administration set aside around points out that "In many cases, people 1.6 billion euros (converted) for projects relating FAST GAME, simply want to sit in the middle and keep to production research in 2013 alone. The NEW RULES control of things". IS Predict is a youthful, prospect of 500 million euros' worth of funding 20-strong part of the Scheer Group that for smart factory networking has been held out to The unrestrained pace of growth is itself the Smart Manufacturing Leadership Coalition specializes in predictive analytics. Con- (SMLC), a nationwide interest group with more changing the rules of the game. "We must cepts and recommendations about opti- than 30 corporate members. master the standards very quickly," mal machine control position the compa- explains Professor Wolfgang Wahlster, the ny as one of myriad new players in a China head of DFKI and an advisor to the Ger- By 2017, Beijing wants to invest some 1.2 trillion growing market. Hilt is nevertheless well euros to modernize and transform its industry, man Chancellor. "This is a genuine power aware of one of the biggest obstacles that though not all of this sum will have a bearing play." Wahlster believes Europe in general still stands in the way of Industry 4.0's on Industry 4.0. The goal? To transform "made and Germany in particular are well placed, more widespread introduction. Despite in China" into "created in China". even though it is often said that America's measurements taken from the plant and Sources: EU, GTAI, db research, Roland Berger, etc. software giants could have an advantage

THINK ACT // COO INSIGHTS 15 INDUSTRY 4.0 COVER STORY INDUSTRY 4.0 if value creation is in future controlled by than 250,000 measurements per second, Diversity, not size, is what matters, ac- those who possess the data. But who the position and orientation of the device cording to Wolfgang Wahlster: "Intel is does the data actually belong to in each is constantly updated in real time. For the gigantic, but it has stayed away from the case? How do you dice and slice it into a time being, Tango is targeting consumer table." Europe holds a few trump cards in workable business model – not to mention applications. Yet its potential in industry is big data mining, too: the Hana databases all the security issues (see page 40). obvious: Smarter navigation, driverless from SAP, Software AG's Terracotta and vehicles, drone control, augmented reality the Berlin-born big data analysis tool GOOGLE BUYS ROBOTICS apps and the control of workpieces and Stratosphere, which was only accepted as FIRMS BY THE DOZEN machines are just a few of the possibilities an Apache incubator project in April of this that spring to mind. To date, the project year. "We have the edge in technology. The At its factory in Michigan, US auto maker has gone largely under the public and busi- Americans are better at networking and Ford runs Siemens software that delivers ness media radar. As soon as that chang- business model innovations," says Wahl- virtual navigation throughout the produc- es, however, it will only add to the palpable ster, the other progenitor of the term tion environment. The aim is to improve sense of unrest that began to permeate Industry 4.0. "We will reach agreement." international collaboration across the the manufacturing industry when Google Endress+Hauser, a Swiss measure- company's plants. The Google Earth infra- snapped up eight robotics firms in 2013 ment and control technology firm, reckons structure lets users take 3D walks through and commissioned Android inventor Andy that businesses can already afford hori- Ford's worldwide production facilities, Rubin to build a robot development line zontal digital integration, by which it means down to the level of the individual work- that is expected to grow fast. measuring instrumentation and communi- space. Customers certainly benefit as a The fragmentation of existing industrial cation systems to capture and transfer the result. The question is, who ends up with IT systems has so far protected European data. These systems automatically track the better deal? Siemens, the supplier machinery and plant engineering. How orders, storage, delivery and inventories. with a similar background that already em- ever, Bosch's Bernd Häuser is not alone in The company is also convinced that verti- ploys 17,500 software engineers and has his view that US software companies could cal integration is realistic. It involves forg- long seen itself as a digitizer? Or maybe it soon roll up the market. Long production ing digital links between the layers of the is new giant Google, which is just lurking in plant lifecycles have kept many IT giants automation pyramid, i.e. factory and busi- wait to pounce on so much lucrative busi- from cultivating an interest in this market, ness processes, interconnectivity between ness with so much data? he says. But their reluctance is now soften- enterprise resource planning (ERP) and the Google's most powerful information ing. "We machine makers have long under- production process. Endress+Hauser nev- collection point is the Android operating estimated the threat." ertheless frankly admit that talk of end-to- system, which is installed on 80 percent of end digital engineering is still premature: the world's smartphones and 60 percent EUROPEAN IT STANDS UP You still can't go out and buy "4.0 as a of all tablets. One aspect of connectivity is TO THE USA package". Like Wittenstein, however, that is that, at some point, it becomes impossible where Endress+Hauser want the connect- for both the users and providers of rival Europe's companies are now sitting up ed road to lead them. systems to resist established standards. and taking notice. As market leaders for Don't hang around. Get going! Martin And Google never rests – witness its Proj- embedded systems, they are focusing on Marx advises manufacturing companies to ect Tango, in which developers are trying to their strengths, such as excellence in sen- quickly start out along the road to Industry implant a human-scale understanding of sor technology. Germany's front-runners in 4.0. Marx is Sales Director at the Harting three-dimensional space and motion in this race are the likes of Continental and Technology Group, a company that earns smartphones and tablets. Universities, Sick, Infineon and SAP. In the Nether- 500 million euros a year with its plugs, ca- research organizations and industrial part- lands, a country replete with sophisticated bles and electromechanical connectors – ners from nine countries around the world industry suppliers, NXP Semiconductors – and that wants to make a name for itself as – including Bosch, Infineon, ETH Zurich, formerly Philips – stands out from the a digital system supplier. "We are starting the George Washington University and the crowd. Switzerland boasts a world-class small," Marx says. "We need to build trust, Open Robotics Foundation – are involved. machinery and plant engineering sector, establish the first networks and, step by The prototype hardware and software while northern Italy is home to technology step, show customers the benefits of 4.0." records motion and creates a model of transfer researchers and companies. Demand must be cultivated gradually. the environment in 3D. Using Android, of France is currently pulling out all the stops Harting is one of more than 30 industry course. With sensors supporting more to make up a two- to three-year deficit. partners that have teamed up to form the

16 THINK ACT // COO INSIGHTS INDUSTRY 4.0 4 POWERFUL ARGUMENTS BENEFITS OF INDUSTRY 4.0

Proximity to the market and closer customer relationships thanks to new business models Quality and services thanks to process Flexibility transparency and in terms of batch reproducibility sizes and variants: customized mass production

Speed thanks to shorter lead times and less outages

THINK ACT // COO INSIGHTS 17

ILLUSTRATION: PETER KRÄMER PETER ILLUSTRATION: INDUSTRY 4.0 COVER STORY INDUSTRY 4.0 non-profit Smart Factory KL e.V. organiza- parallel, all with no labels. That guarantees that the EU wants to raise manufacturing's tion, a vendor-independent platform that maximum flexibility, reduces the time to share of gross value added from 16 per- seeks to integrate mature information market and paves the way to very small cent today to 20 percent by 2020. technologies in factory automation. batch sizes. The ink is removed again Reorganizing the value chain opens up Companies in the network use test when the bottles are recycled, all of which vast stores of economic potential, al- modules to demonstrate how even com- saves time, money and tons of waste. though the conditions in place across Eu- petitors can use harmonized interfaces The digitization of business processes rope vary very considerably: France cur- to share the task of specialized produc- has now also birthed a very special variety rently has only 35,000 production robots, tion. Each module recognizes its neigh- of customized mass production: contract compared to 65,000 in Italy and 150,000 bors and can be swapped or replaced at manufacturing. Take 247TailorSteel, for in Germany. These figures come from the any time. "Technologically, our system example, a web-based procurement portal French government, which has announced was already more advanced in 2013," for contract manufacturing services relat- its intention to invest in the EU-backed says Professor Detlef Zühlke, the chairing to sheet steel and tubes. The company Factories of the Future (FoF). The question man of and driving force behind the tech- expanded from the Netherlands into Ger- is whether industry will seize the associat- nology initiative. "Today, we are more many some years ago. Every workflow from ed opportunities. Jean-Camille Uring, COO concerned with workable business mod- the drawing board to CAD is optimized to of Fives Cinetic and President of CECIMO, els than what is technically feasible." meet customers' individual requirements. the European Association of the Machine Zühlke mentions contact with renowned Quotations are generated in minutes at the Tool Industries (see page 3), speaks of a customers who, for the first time, serious- click of a mouse and guarantee "top quali- divide in the French economy. In his ca- ly want to buy something: a component ty that is reproducible at any time", in the pacity as Fives manager, he knows what it manufacturer from the aircraft industry, company's own words. As far as the tech- means to design and ship plant and ma- an auto maker, a plant monitoring firm. nology is concerned, the claim is certainly chinery for the world's biggest industrial credible, with production of the workpieces groups in industries from aluminum and WORKABLE handled by laser cutters from Trumpf. This aerospace to sugar and steel. And in his BUSINESS MODELS is how digitization is giving firms such as capacity as advisor to the government, he 247TailorSteel a satisfied customer base. helped draft organizational and financial Industry 4.0-centric business models are aspects of the vision of the "usines du taking root everywhere – at Bosch in Hom- CUSTOMERS LEAVE futur", together with plans for individual burg, for example. Production of hydraulic COMPANIES NO CHOICE industries. Uring is aware of the lack of butterfly valves for tractors – 2,200 vari- competitive edge among small and medi- ants in small quantities – began here, Do our highly advanced economies even um-sized enterprises in France. New ma- close to Germany's borders with France have a choice? No, asserts Professor chines alone, he notes, are not the solution and Luxembourg, in June 2014. Custom- Thomas Bauernhansl, because customers for global markets. ers send their orders straight to the and markets – not technologies – are the Europe must therefore build on its production plant, which configures itself drivers of modularization and greater strengths. Many see Germany as the front- autonomously, picks the parts it needs flexibility. Bauernhansl oversees the IFF runner in digitizing the economy. Yet that is and constantly analyzes data about the Institute for Industrial Production and Fac- only ever a momentary snapshot. In the production status. "The investment in the tory Operations at the University of Stutt- fiercely competitive Industry 4.0 environ- new production line pays for itself very gart, as well as heading the Fraunhofer ment, there is no time for complacency. quickly," says Bosch manager Häuser. Institute for Manufacturing Engineering Machines are more productive because and Automation (IPA). His reasoning is they no longer need to be converted or simple: A large share of manufacturing refitted. Employee productivity improves, these days equates to significant progress too, because staff no longer have to waste and dynamic growth. Between 2000 and time typing in individual orders. 2010, productivity rose by 30 percent in Dortmund-based drinks bottler KHS German industry – twice as fast as the has likewise shortened its value chain. increase in the service sector. In 2010, Thanks to its award-winning digital tech- manufacturing accounted for nearly 90 nology Innoprint, KHS can now print thou- percent of R&D spending. For Bauern- sands upon thousands of PET bottles in hansl, it is therefore only right and proper

18 THINK ACT // COO INSIGHTS

INDUSTRY 4.0 KRÄMER PETER ILLUSTRATION: PHOTO: ISTOCKPHOTO BY GETTY IMAGES

PREQUEL

NOT AT ALL SCIENCE FICTION

HOLLYWOOD PIONEERS 4.0: THE DREAM FACTORY REPEATEDLY CHURNS OUT FILM MATERIAL THAT PAVES THE WAY TO NEW AND VERY REAL BUSINESS MODELS. SOBER VISIONS AND BOLD REALITIES – SNAPSHOTS OF A JOURNEY THROUGH TIME.

THINK ACT // COO INSIGHTS 19 INDUSTRY 4.0

Batman tested drones in "The Dark Knight Rises" in 2012 – before even Amazon and DHL showed an interest. Today, civil drones inspect high-voltage power lines and photograph every millimeter of dams to produce 3D models that are detailed and pre- cise. At the Volkswagen plant in Germany's Baunatal valley, they whizz around the spacious production halls to spot compressed air leaks high up in the rafters.

THE DARK KNIGHT RISES

PHOTOS: ACTION PRESS; PARROT SA 20 PHOTOS: PICTURE-ALLIANCE; ULTRA GLOBAL

Back in 1990, we thought boarding a self-drive "robotaxi" was the exclusive preserve of Arnold Schwarzenegger in "Total Recall". Far from it: Fully automated driverless vehicles are already in service at London's Heathrow Airport, whose Personal Rapid Transit system ferries passengers around the airport on demand, following dedicated guideways and with no stops along the way. Mean- while, US companies are already considering the next step: having Google's self-driving car travel on public highways and cope with the traffic autonomously.

TOTAL RECALL 21 In the 2012 comic strip film "The Avengers", superhero Robert Downey Jr. taps videos with his fingertip, swipes his hand across screens and operates control sliders on holographic displays. "Ironman" remotely controls all kinds of systems – excelling as a pioneer of preventive maintenance. Today, autos can project their current speed and direction arrows onto the windscreen for navigation purposes. For the time being, pedestrians make do with Google Glass.

THE AVENGERS

PHOTOS: ACTION PRESS; BMW GROUP 22 PHOTOS: ACTION PRESS; GOOGLE

In "Prometheus" in 2012, film director Ridley Scott picks up where he left off in his 1979 megahit "Alien". When the spaceship enters an alien cave, hovering spheres are sent out to survey the terrain. They record everything they see to produce a holographic map. Right now, Google Tango is emerging as a real-life analogy. Smartphones are being fitted with sensors that let them piece together a 3D picture of their environment, opening the door to a com- pletely new kind of navigation – in museums, in factories and even at home.

PROMETHEUS 23 AT ITS US PLANT IN SPARTANBURG, SOUTH CAROLINA, BMW USES COLLABORATIVE ROBOTS IN DOOR ASSEMBLY. THEY HELP THE HUMAN WORKERS – PRECISELY, QUICKLY AND AS OFTEN AS NECESSARY.

"LEANER, FASTER, MORE STABLE" HARALD KRÜGER, Chief Production Officer at the BMW Group, talks about the promise of Industry 4.0, possible shifts in the value chain and future interaction between humans and machines.

Interview: Jochen Gleisberg, Philipp Grosse Kielmann and Thomas Reinhold PHOTOS: Thomas Dashuber

Mr. Krüger, some see Industry 4.0 as a That is absolutely fundamental. Industry more robust and provide information that buzzword. How do you at BMW define 4.0 won't replace people. It is different to has not been available hitherto. So we the term? As the link between the digital past developments such as computer-in- are not talking about pure automation. world and the real world – as connected tegrated manufacturing, which conjured Does that mean the evolution of or a smart production and connected systems. up visions of deserted factories devoid of revolution in production? For me, it is That is how we have defined it to date. all human agency. I am convinced that not a revolution that involves some huge Sounds fairly mainstream. What do you human beings, their skills and their com- digital leap forward. It is not as if what is see as special about this topic? The petencies will remain the pivotal success valid today suddenly no longer applies. BMW Group always puts people at the factor. They will be flanked by Industry But one thing will change significantly: center of its production systems, and 4.0, which will improve the ergonomic as- BMW, like other companies, needs peo-

Industry 4.0 must support those people. pects of certain things, make processes ple with a keen interest in a knowledge of roup : BMW G THINK ACT // COO INSIGHTS

24 hoto

IndustrY 4.0 P iew Interv Harald Krüger ber ashu D homas : T oto THINK ACT // COO INSIGHTS 25

PH IndustrY 4.0 iew Interv Harald Krüger

"BMW always puts people at the center of its production systems. That is absolutely fundamental."

systems. We will learn to focus more on tion in processes. Industry 4.0 promises to providing even greater quality assurance. systems and to think along integrated make us more innovative and perhaps This ergonomic assistance makes the lines. We will see the whole system, not faster, for example by reducing the number production system sustainable. We are just individual work and process steps. of tests involving hardware. We are already also trialing similar elements in other set- To keep things in perspective: Do you moving toward more digital modeling: in tings. That is driving progress in efficiency believe Industry 4.0 is over-hyped or un- prototype construction, in product and and quality – thanks to connectedness. derestimated? I believe every company process development. Time is a very im- And this is the opportunity that Industry must look for the potential inherent in it. portant factor in the competitive context. 4.0 has to offer: enhanced connectivity Industry 4.0 is not a panacea. But it is A shorter time to market – the time that improves the overall result. another opportunity to tackle things in a from development to the placement of How will Industry 4.0 change your rela- more joined-up way, to inject greater reli- a product on the market – is regarded tionship with suppliers? Will there be ability into lean processes, to achieve as one of the main benefits of Industry shifts in parts of the value chain? We are higher productivity and superior quality. 4.0. That is why we are interested in it. an OEM, so we will always concentrate on Yet that alone will not help us make the We began with small pilot projects like vehicle assembly, on the car itself. But industry more competitive. the one at our US plant in Spartanburg, maybe we will move toward more preas- BMW has recently been praised for its South Carolina. The collaborative robots sembled modules that are supplied to us advances in productivity. Why does BMW deployed there in door assembly help the in connected digital processes. That goes need to open itself up to the world of human workers – precisely, quickly and as as far as simulated assembly, in which we Industry 4.0 at all? Connecting the entire often as necessary. The movements of develop one part of digital door assembly value stream from raw material to end both people and robots have been opti- while the supplier develops the other part. product, to the finished automobile, har- mized and harmonized to ensure there The whole development and production bors potential that has not yet been are no collisions. That is what I call intel- system can be simulated, even across in- exploited. The BMW Group is a company ligent networking. That is the production ternational facilities. Working together with whose innovation sets it apart again and of the future: interaction between hu- our suppliers, we can make things leaner, again – through the use of carbon fibers in mans and machines. We also had re- faster and more stable. This will further the electrically-powered i3 and i8, for ex- search partners on board. Our people optimize the way we interact, but I don't ample. If you want to drive innovation in won't be replaced, but the robots help think it will lead directly to shifts in the ber ashu products, you've also got to drive innova- make the process even more stable, thus make-up of the value chain. D homas : T THINK ACT // COO INSIGHTS

26 hoto

IndustrY 4.0 P on Won't more connectedness tend to in- 11 4 crease the importance of suppliers? The majority of the value added in our chain is already in the hands of the suppliers. THE BIGGEST PRODUCTION Especially in the premium segment, car production only works if suppliers and FACILITIES IN THE BMW GROUP OEMs collaborate seamlessly. There are Adding value around the globe: Spread across four continents, the eleven biggest obviously all kinds of chains and different BMW facilities are located in the USA, Germany, the UK, Austria, South Africa kinds of suppliers. Some contribute an and China (vehicle production in thousands per year). Oxford is the home of the Mini. entire system, including development. They develop a door panel and do the testing, too. But there are also component manufacturers and parts suppliers. In the context of connected production, we will intensify our cooperation with system sup- 342.6 pliers, because the early phase of product Dingolfing development is important. We want integration to take place as early as possible. 297.3 295.5 Spartanburg That way, we can align interfaces so that Regensburg parts can be optimized collaboratively for lean, fast production from an early stage. 247.3 That is how connectedness will increase. Munich Having said that, Industry 4.0 will not fun- damentally change the importance of our 186.7 suppliers. They are already very important. 176.0 Oxford Leipzig What concrete research projects are you conducting, and with what goals? We are conducting projects to connect software. In the BMW Group, we work with 125.6 126.9 project teams and without too much orga- Graz Dadong nization. Our Industry 4.0 strategy targets three objectives: First, projects in re- 88.0 search and predevelopment. The collabo- 65.6 Tiexi Rosslyn rative robots in Spartanburg originally 3.0 came from the predevelopment phase of Goodwood production. We are interested in new, lightweight construction, a different kind USA GB DA RSA CN of automation, new combinations of materials, easier fastening, and simpler concepts for shorter production lead times. Second, we refine and improve ideas in the routine setting of volume manufactu ring. We are currently investigating how we can deploy these elements for future model series and products: building smart networks to tap quality, cost and one-time expenditure potential. Third, we work with elements of Industry 4.0 in relation to the planning of new product projects and new production structures. Source: BMW Group

THINK ACT // COO INSIGHTS 27 IndustrY 4.0 iew Interv Harald Krüger

Can you explain that in a little more more quickly in new production settings. Customized mass production – another detail? Let me give you an example. We There are several aspects of this technol- promise of Industry 4.0 – should be are currently expanding our internation- ogy that I get excited about. nothing new to you. In theory, there are al production network, including a new How do you rate the overall potential of more possible variants of every car than plant in Brazil and one in Mexico. The Industry 4.0? I don't think there will be a BMW ever sells. Yes, we do have a very factory in Spartanburg is also being digital leap of 20 to 30% in productivity. large number of variants. But Industry 4.0 ramped up significantly. New production But I am happy about small, day-to-day will give us still greater flexibility. We structures are emerging that will take productivity gains. Just 5% would be a lot assemble our 3 Series, for example, in the online simulation of lead times and if you map that onto two million vehicles South Africa, China, Munich and Regens- processes to a higher level. At an earlier a year. We build about 8,000 cars a day, burg. So if I can relatively quickly slot a stage and more intensively, we are map- so our responsibility is to be efficient day new technology into place at four loca- ping aspects of traditional technical in, day out. tions, hook them up globally and get them planning into a connected, digital plan- In your capacity as Chief Production working reliably, that opens up consider- ning base that involves the suppliers. If Officer, where do you see other posi- able potential. Simulation covers not just we build a paintshop, for example, we tives from the introduction of Industry production, but also the logistics, all flows commission a large plant engineering 4.0? There are three good arguments for of goods and all delivery concepts. That firm to deliver the whole thing. For BMW, Industry 4.0: One is the demographic way, you can quickly see whether an extra the OEM, the important aspects are the door panel variant also requires new logis- lead times, the cool-off times, the sta- tical processes or a bigger warehouse. bility of the entire production chain. Which brings us back to thinking in terms Assembly processes are another exam- "Three good of systems. Industry 4.0 will make that far ple. We will leverage the benefits of col- arguments for more vital, requiring staff who have an ex- laborative robots to make our vehicle tensive range of skills and who enjoy forg- assembly more productive in other loca- Industry 4.0: ing links between technology and IT. tions, too. Speaking of which: Is information tech- Does that pay off? If you look at the ex- demographic nology increasingly taking control of ample of Spartanburg, it certainly does! change, production in Industry 4.0? Industry 4.0 The production workers are delighted. adds to the importance of IT, but that Right now, we are evaluating the poten- time savings, does not constitute a fundamental shift. tial, we are learning. Industry 4.0 is all We already have lots of people working at about ongoing development and improve- quality" the point where IT dovetails with tradi- ment. It is early days, but the initial signs tional production planning. The BMW look very positive. Group has always seen that as part of its Workers will obviously be delighted if a core competency. robot carries the doors for them. But is Will BMW acquire IT specialists if nec- the commercial manager in you equally change in Germany. At BMW, the number essary? We will always give top priority to delighted? He is indeed. Efficiency and of employees aged 50 and over is steadi- developing our in-house IT expertise and productivity are always important to me. ly increasing. Optimized ergonomic relief recruiting graduates and researchers from Point number one: This robot technology means efficiency gains thanks to a universities. The proportion of employees is very reliable. I am not at all delighted healthier work force. The second is speed. with a knowledge of software is tending to when production gets disrupted. We pro- Today, we want to get products to market increase as a function of the rise in in- duce a new car every 60 seconds, so quickly and rapidly expand production vehicle electronic content. International- every second of downtime is a loss to us. capacity whenever the market demands ization, too, is driving much greater con- Point number two: Everything can be im- that we do so. Less effort thanks to digi- nectedness. If you are building one type of plemented and integrated much more tal connectedness and improvements at vehicle at multiple sites, you have to have quickly. We need fewer big superstruc- the interfaces between subcontractors, those bases covered globally – in the bill tures, no safety bars and no cages. Our system suppliers and OEMs saves us time of materials systems for logistical pur- new robots are small and flexible. It – a genuine competitive advantage. The poses, for example. Ultimately, produc- takes less time to integrate and switch third argument has to do with quality and tion planning has itself become a much them, so they can even be deployed reliability. more globalized discipline.

28 THINK ACT // COO INSIGHTS IndustrY 4.0 "It is early days for Industry 4.0, but the initial signs look very positive."

Who is responsible for driving this is- The requirements placed on your team technology is worthwhile for 300,000 sue at BMW? The CFO, who is looking are changing. What is changing for you units, but not for this number. These are to cut costs? The CIO, who sees his or personally? How do you deal with new the same calculations we used to per- her position becoming more impor assignments? One of the things asked of form for automation when thinking about tant? Or you, the Chief Production me is that I concern myself with this issue whether robots would pay for themselves Officer? I believe each of us will drive more intensively in order to better under- given a certain volume and labor costs. this issue within our own sphere of influ- stand the potential of Industry 4.0. Why? What is your vision for digital produc- ence. That is also something we do to- Because I have to implement it in new tion? We still have in mind this image of gether as a company. To take one exam- product and structural projects, or pass it the collaborative robots in Spartan- ple: The head of technical assembly on as a target for others. I have to weigh burg, which are essentially a form of planning at the BMW Group used to be up the opportunities and risks. I also ask ergonomic tool… which is just one sam- in charge of production IT. He was the myself where we might be able to engage ple application, because we are still right one who made the infrastructure and, in in other forms of collaboration with uni- at the beginning. particular, the application software versities and suppliers, and what that Okay, point taken. But are we also talk available. Now he is responsible for the might mean for the BMW business model. ing about pure machine-to-machine technical planning of assembly activi- Lastly, I apply myself every day to interna- communication in which human work- ties. That helps him achieve the targets tionalizing the BMW Group network. It is ers have nothing more to do than use I set him for absolute and relative proof no use to me to have a perfect model their tablets to watch what happens? duction costs, for one-time expendi- factory in Germany if we ignore alterna- We could also talk about vehicle-to- tures and for capital spending. He is tives in other places. machine communication. At BMW, a lot familiar with both sides. It is not unusu- Are the structures in, say, South Africa of information is exchanged between the al to have people at BMW change their so much different to the ones in Re- vehicle as it goes through the produc- perspective in this way. One department gensburg? They are, yes. In South Africa, tion processes and the machinery – all or one function alone cannot leverage local suppliers normally roll out smaller the quality, process and environmental the full potential, which is why it is so quantities than in Europe, where we are data that is generated here and can be important for people to work well to- supplied by a number of large OEMs. That put to good use. Our vehicle knows what gether. People are the drivers of con- often leads to processes that are far less model it will be, what color it will have, nectedness. Without their curiosity automated; and that is where commercial what extras will be fitted. We may even about new things, we would never have considerations come in. Last year, we be able to add further variants later in ber seen carbon fiber-reinforced car bod- produced over 60,000 cars in South production. We simply have to remain ashu D ies, for example. Africa. Now, you might find that a given open. homas : T THINK ACT // COO INSIGHTS hoto 29

P IndustrY 4.0 IntervIew Harald Krüger

And where, in your opinion, do we go like what you would expect of a BMW? exist in both markets. The USA has a lot of from here with Industry 4.0? It is still Whatever happens, Industry 4.0 will not innovative developments in application IT. too early to say exactly where all this will leave the people involved in manufactur- In Europe, and not just in Germany, we lead at BMW. That depends on so many ing complex vehicles standing on the have an unrivaled SME segment with many factors. How will the technology develop? sidelines and merely monitoring automat- innovative smaller firms. We know suppli- At what prices? Which processes can we ed processes on their tablets. ers and universities that are concerning model and which ones can't we? Take the Who do you believe has the edge in the themselves intensively with production lo- haptic and visual properties of a car, for international race for connected produc- gistics and production software. As things example: Does the vehicle look and feel tion? europe or the USA? Opportunities stand, Europe is more connected. I'm tal k- tHe LOGIC OF

BMW'S SUCCeSS FACtOrIeS A GLOBAL NETWORK GLOBAL PRODUCTION, OF ADDED VALUE MORE MODELS, NO. OF PRODUCTION SITES GERMANY REST OF WORLD 2013 A BROADER SALES 19 FOOTPRINT 8

2004 Rolls- 15 Royce 7 4 BMW 23

Mini 7 2013 34

Rolls- Royce MODeLS Mini 1 2 NEW VARIETY IN THE PRODUCT RANGE 2004 17

BMW 14

SALeS PreMIUM FOr ALL Full range: Models such as the i3, MORE BUYERS Mini Countryman and BMW X6 are IN EMERGING targeting new swathes of buyers MARKETS 2013 1.97 million

Source: 2004 BMW Group 1.21 million

30 PHOTOS: BMW GROUP iew Interv Harald Krüger

It sounds like everything is rosy in the garden. But what about the competition? Surely BMW has to get ahead and not just get connected! You always have to face up to competition. You do it again and again, day after day. Where we believe Industry 4.0 gives us a chance to gain a specific competitive advantage, we will seize that opportunity. But there is another side to connectedness: If you believe the opportunity lies in standardization, you need to achieve consensus. That is why we will see both dimensions. Where do you stand right now com- Talking to BMW Board of Management member Harald Krüger: pared to other companies? I believe the Roland Berger Partners Jochen Gleisberg (at left) and Philipp Grosse Kleimann BMW Group is not doing badly at all. But market transparency is only now beginning to emerge. As things stand, different ing about research, predevelopment and But our research effort has a global foot- companies attach widely differing signif- production – not the development of ser- print. We have been running a Technology icance to Industry 4.0. The spectrum vices, but of real industrial products. But I Office for development and production in ranges from "very important" to "nothing am not saying things can't develop along California for more than ten years. We will change for us". similarly positive lines in the USA. have another one in Japan. We receive Siemens sees itself as having reached What part does this kind of consider- fresh ideas from here and other parts of Industry 3.8. What about you? We're not ation play for BMW as a global enter- our global network, for trend scouting and going to invent a name, because that prise that is only historically based in production volumes, too. Innovation is no would run counter to the philosophy of Munich? We are driven by a strategy fo- longer confined to just one place. continuous improvement. For us, it is an cused on balanced global sales distribu- Where do you see your international important topic, and one to which we are tion. Production follows the market. In rivals with regard to Industry 4.0? I be- applying ourselves intensively. We are other words, we need a successful produc- lieve Europe is out in front on this score. only at the very beginning of a very pro tion base in all markets. That means em- That is what my view of Germany and the mising development. But that is what ployees who have the right skills, and part- European networks tells me. We shouldn't makes it so exciting. ners and suppliers who connect and be looking only at OEMs, though, but also cooperate with us. Twenty years ago, when at Europe's extensive supplier network. we set up Spartanburg and built up our On the subject of industrial capabilities: Harald Krüger operations there, many suppliers followed Can smart technologies help Germany Born in Freiburg in 1965, studied in Braunschweig us and opened their first American branch- in particular corner a larger share of the and Aachen, earned a degree in mechanical engi- es. The internationalization of the market value chain? I believe Germany has the neering from RWTH Aachen University in 1991. Joined BMW AG as a trainee in Technical Plan- causes the supplier structure to interna- chance to play a lead role in Industry 4.0. ning/Production in 1992. Involved as a project tionalize with it. In the USA as in Germany We have been through the arguments engineer in the build-up of the Spartanburg plant (USA) in 1993. Held various management posts and China, we strive to optimize our quali- already, and there is also our strong plant in Munich and the UK from 1997. ty, efficiency and speed. The collaborative engineering sector. Germany is giving the Appointed as a member of the Board of Manage- robot – by way of example – was intro- topic a great deal of attention. Via the ment on December 1, 2008, initially with responsibility for HR and social affairs and later for the duced first in Spartanburg, but had al- agency of Acatech, for example, the BMW Mini, BMW motorcycle and Rolls-Royce brands ready been used in Germany in research Group has been involved in drawing up and for after-sales. Has overseen production throughout the BMW Group as a Board member and predevelopment. That is how things recommendations for federal government since April 1, 2013. will develop throughout our network. on the implementation of Industry 4.0. At its meeting on December 9, 2014, the Super Is your head office still the breeding But we must not underestimate global visory Board of BMW AG appointed Harald Krüger ber ground for such topics? We naturally developments. Speed is also a factor in to become next Chairman of the Board of Manage-

ashu ment effective the end of the Annual General D have many good specialists in Germany. competition between locations. Meeting on May 13, 2015. homas : T THINK ACT // COO INSIGHTS hoto 31

P IndustrY 4.0 KPIs

The fourth industrial revolution is be ginning to unleash its potential. What do businesses and economies stand to gain? And who will the winners be?

| GROWTH ENGINE | | REGIONAL COMPETITION | Industry 4.0 outpacing Initial handicap for Europe the global economy Shares of the global ITC market 1 (2013) 2 USA 27.1% EU 21.3% BRIC 18.7%

| DIGITAL UNIVERSE | 62% of the world's data GLOBAL GDP: GLOBAL INDUSTRY 4.0: USD 82 trillion USD 13.1 trillion traffic volume in the year 2020 will come Annual growth through Annual growth through 2020: 2.5% 2020: nearly 6% from China and India. 3

32 THINK ACT // COO INSIGHTS INDUSTRY 4.0 54%

| VALUE ADDED | | MARKET ANALYSIS | EUR 78 Billion in productivity gains (23%) are feasible 31% in six German industries between now and 2025. Mechanical and plant 26% engineering, electrical engineering and chemicals in particular stand to benefit from Industry 4.0, along with ITC, the auto industry and agriculture. 17% 4 15%

| RESOURCE PRODUCTIVITY | USD 30 BILLION CAN BE SAVED OVER THE NEXT 4% 15 YEARS IF THE USE OF

INDUSTRY 4.0 TECHNOLOGIES INTENSIVELY SPORADICALLY NOT AT ALL ENABLES KEROSENE CONSUMPTION Mechanical engineers Plant operators TO BE CUT BY 1%. Supply still has the edge 5 Survey: "How intensively are you tackling Industry 4.0?" | CEO AGENDA | 7 Established at top management level Survey: "Who at your company concerns | GOVERNANCE | themselves with Industry 4.0?" 41% 6 Production OF RESPONDENT COMPANIES Business HAVE NOT YET APPOINTED 52% management SOMEONE WITH OVERALL IT RESPONSIBILITY FOR INDUS 45% TRY 4.0 TOPICS. 6

34% SOURCES 1 Wikibon; Roland Berger 2 Bitkom/EITO ICT Market Report 2014/15 3 IDC Study "Digital Universe", 2012 4 Bitkom/Fraunhofer IAO, "Industry 4.0 – Economic Potential for Germany", 2014 5 GE Report "Industrial Internet", 2012 6 Experton user study "Industry 4.0", covering German ITC decision makers, 2014 7 IDC, "Industry 4.0 in Germany", survey of German manufacturing companies>100 FTEs, 2014 33 Ctrl. Additive Manufacturing alias 3D printing captures the imagination like no other production method. The most fascinating business models are rooted not in mass production, P but in dynamic niche markets.

There was certainly no lack of hype in the small series. It also opens the door to complexity, but are linked merely to the media and on the stock exchanges in new business models. weight of the manufactured component. New York and Frankfurt in 2013. Since The latter derives from three disruptive Virtually unlimited digital design options then, expectations placed on the manu- paths: the rapid, low-cost manufacture of allow high-strength materials to be fash- facturers of 3D printers have been toned individual products; new geo metries, ma- ioned into new geometric forms that con- down and are more realistic. Stock pri- terials and processes; and distributed ventional production methods have never ces are trading sideways at best. Fore- production. All three will profoundly influ- been able to cope with. New component casts still point to a fourfold increase in ence the production industry and both functions can thus be implemented that the market over the next decade – to B2B and B2C business models. further reduce lifecycle costs. New repair eight billion euros generated by sales of strategies for high-value parts save time plant, materials and component manu- DIGITAL DESIGN: and money. Resource efficiency im- facturing. That adds up to rapid growth THE SKY IS THE LIMIT proves, too, as production consumes ex- from a narrow base: 3D printing ma- actly the quantity of raw material that chines account for less than 1.5% of the Compared to conventional methods, AM corresponds to the weight of the finished machine tool market. Yet even if the opti- delivers a series of advantages. The fact part – no more, and no less. mistic predictions come to pass, these that the CAD data is channeled directly There are still a few clouds in the machines are not going to replace any into the part or component leads to ex- additive manufacturing sky, however. existing production technologies in the tremely short process chains. Relatively Severing the link between cost and batch medium to long term. little investment is therefore needed to size can be both a blessing and a curse. Most promising is not the mass market distribute production. If parts that are currently rolled out in for metal or plastic parts. 3D printing – Batch size has no bearing on the cost medium to large series were to be manu- production technicians speak of gener- of parts, which favors the production of factured "as is" using 3D printing tech- ative or additive manufacturing (AM) – highly specialized small series and proto- niques, the unit cost would increase by a creates significant benefits for (very) types. Nor do costs depend on geometric factor of between 10 and 50. The cost

34 THINK ACT // COO INSIGHTS INDUSTRY 4.0 3D PRINTING

would quickly fall, of course, but not by enough to make up this discrepancy. Why? Because 3D printing knows no economies of scale. The first component costs just as much as the hundred thou- sandth component. Better leverage can be achieved with small series and prototype production. Robust prototypes can be rolled out overnight, without the need to procure complex tools. That shaves months off devel- Application in medical engineering: opment and testing cycles in sophisti- The model shows how perfectly cated industrial development programs. the 3D implant ﬁ ts the aperture For highly customized products such as in the skull – an excellent example dental crowns, medical implants and of advanced customization. even designer jewelry, 3D printing is already an established and competitive production method. If no tools are needed, industrial products can be manufactured on demand – and even outsourced to partners if necessary. 3D printers for metal components cost between 400 and 1.5 million euros, depending on the need for

THINK ACT // COO INSIGHTS 35

PHOTO: FRED SMITH ASSOCIATES INDUSTRY 4.0 3D PRINTING quality, overall dimensions and build rate. cient combustion processes allow aircraft, R&D departments will likewise have to Professional systems for plastic parts sports vehicles and racing cars to benefit adapt the way they work to this new tech- production start in the tens of thousands from lower fuel consumption. General nology. Development timelines are shrink - of euros and can go up to six figures. The Electric, for example, has improved fuel ing from months to days. Creative ideas quality of these professional systems is injection nozzles for use in aircraft. can be implemented in short cycles. vastly superior to the "home printers" that Software is becoming more important sell for a few hundred euros. In the B2B SHORT CYCLES than ever – as a tool to support develop- segment, a highly specialized infrastruc- FOR CREATIVE IDEAS ment and production, but also as part of ture has sprung up in which service pro- the product itself. Leading German viders optimize customers' parts and Customers can offset the cost of produc- manufacturers are thus taking a close handle the actual production. Web plat- tion against the far weightier factor of fuel look at the creative agility with which forms such as shapeways.com and manu- savings during the product lifecycle. It is software giants control their develop- facturing.materialise.com also serve the therefore no surprise that all the major ment processes and reduce complexity B2C segment. aviation groups are working on 3D printed using the empirical, incremental and iter- Using AM becomes especially lucra- components, including efficient engines ative Scrum framework. tive where a product's costs, such as re- with new flow properties and optimized Further new developments are con- pair costs, can be reduced over the entire combustion. The first series production ceivable: large, complex structures (air- lifecycle. Siemens, for example, grinds runs are expected in 2015. craft wings), combinations of materials down worn out gas turbine burners and (metals and synthetics) and the combi- rebuilds them using additive methods. nation of additive manufacturing with More lightweight designs and more effi- cutting machines (for turning, grinding and drilling). For production purposes, additive manufacturing is the next step in the digital transformation. Even as an industrialized niche technology, however, LIGHTER, 2 it will not lead to the demise of tradi- FASTER, tional methods. CHEAPER

Additive manufacturing builds (or "prints") three- dimensional parts in (additive) layers. Plastics, ceramics, glass, sand and/or metal are processed in line with the 3D data for the part which engineers create in a Computer-Aided Design (CAD) environment. The processes from design to production are more flexible, more efficient and less expensive – a 1 prime example of the digital transformation taking place within the framework of Industry 4.0. Airbus, for example, fits bionic cabin brackets made of titanium powder in its A350 aircraft 1 : 3 These brackets are 30% lighter than their prede- cessors, and production generates 90% less raw material waste. Both production and operating costs are down as a result. General Electric "prints" cobalt-chromium fuel injection nozzles for aircraft engines 2 . Every gram counts in motor racing, too. Made of aluminum powder, this partially hollowed upright joint from EOS 3 is 35% lighter and has 20% greater torsional rigidity.

36 THINK ACT // COO INSIGHTS

INDUSTRY 4.0 PHOTOS: AIRBUS GROUP; RENNTEAM UNI STUTTGART; GENERAL ELECTRIC

EASTERN PROMISE

PREPARING A TOUR DE FORCE

To realize China's ambitious plan to become a global high-tech supplier, the government and the corporate community are driving the implementation of Industry 4.0 concepts. Yet the country still faces daunting hurdles.

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PHOTO: ISTOCKPHOTO BY GETTY IMAGES INDUSTRY 4.0

EASTERN PROMISE

he Hannover Messe trade show in include combining production with the in- that have completed the transition to ex- 2011 prompted the first stirrings ternet. However, the concepts and mea- tensively connected information technolo- of change. Chinese firms, govern- sures since developed do indeed very gies, data management cannot be descri- ment officials and industry asso- closely match Industry 4.0 approaches. bed as satisfactory. To date, a number of ciationsT feasted their eyes on new approa According to the government's 2012 Chinese firms have, for example, neglec- ches to smart production: Industry 4.0 plan, China's industrial sales are to grow ted to use data mining to leverage the be- prototypes developed by leading German by an average of more than 25% per an- nefits of intelligent production. companies. num and should top one trillion yuan for Curiosity quickly morphed into vision. the first time in 2015. A volume of more THREE STEPS Chinese industry experts report that Indus- than three billion yuan is projected for TOWARD 4.0 try 4.0 has since been understood as an 2020. Intelligent production is to be one opportunity to raise broad swathes of the of the drivers of this growth. To help companies quickly lay a firm foun- country's industry to a new technological A more sober analysis of China's in- dation for expansion in the direction of level – a level of intelligent, digital, web- dustrial base nevertheless shows that a Industry 4.0, the experts at Roland Berger based business models and production wide gulf still separates this vision from recommend a three-step roadmap. methods. reality. One striking macroeconomic fact The first challenge is to optimize both is that, for all the country's political and the manufacturing base and capacity in HUMAN WORKERS economic endeavors in recent years, its research and development, to ramp up WILL STEP BACK manufacturing industry continues to lag quality controls and to advance employ- far behind competitors in the Western in- ees' development and education. At the If that is to happen, however, the country dustrialized world when it comes to accu- same time, companies must nurture the must take a huge leap forward in technol- mulating technological expertise and put- credibility of their products and cultivate ogy. Domestic experts describe the new ting it into practice. Most Chinese brand awareness. If they want to narrow era thus: Production will shift away from manufacturers still compete only on pro- the technology gap to Western competi- the time-honored model of "people ana- ducts that add little value and generate tors, they must develop a new agility with lyzing and deciding and machines produc- thin margins. China's share of the mar- the aim of leveraging product and pro- ing", moving instead toward the organiza- kets for high-end and special sensors, cess innovations to fuel faster growth. tional principle that "machines analyze, intelligent instruments, automated and Second, leading manufacturers must decide – and produce". The human factor digital control systems and robotics pro- be encouraged to consider the develop- very definitely recedes into the back- ducts, for example, is less than 5%. Most ment of Industry 4.0 especially in sectors ground in this equation – a distinctively companies are still some way away from in which they are internationally compet- Chinese take on the theme of Industry being able to assert themselves on the itive – in components and plants for power 4.0. By contrast, experts in Europe believe global market as system and solution generation, transmission and distribu- that skilled workers will remain indispens- providers. Compared to Western rivals, tion, for instance. Market prospects are able even in the new epoch of digital, con- their capabilities to innovate are modest similarly promising in mining and in agri- nected production. Accordingly, the Old at best. cultural machinery. Manufacturing, how- Continent is already debating the kind of On the microeconomic level, most ever, remains at the core of Industry 4.0, education and qualifications that Industry Chinese companies are still in a transitio- driving development toward the end-to- 4.0 businesses will need. Time will tell nal phase from Industry 2.0 (production end digitization of production. Global who is nearer to the truth. without the use of digital technology) to leading players are already using the In- Either way, Chinese industrial companies Industry 3.0 (production involving basic dustry 4.0 concept for remote diagnos- can be sure to enjoy the fullest backing of digital technologies). The competence tics, predictive maintenance and other the state. As early as 2012, the Chinese gap is equally apparent from the lack of intelligent processes, products and ser- Ministry of Industry and Information Tech- transparency in internal information and vices that are gaining ground on the Chi- nology published its 12th Five-Year Plan, the piecemeal design of information sys- nese market. Domestic firms would do part of which is devoted exclusively to tems – not to mention the mismatch be well to take this to heart. high-end equipment manufacturing and tween standards and actual processes, as Chinese companies that boldly and intelligent production. The term Industry well as the fact that some industrial pro- resolutely back Industry 4.0 are already 4.0 is not mentioned explicitly. Nor did the cesses are heavily dependent on individu- reaping the first fruits. One of them is the original definition of intelligent production al behavioral patterns. Even in companies Daquan Group, a digital monitoring tech-

38 THINK ACT // COO INSIGHTS INDUSTRY 4.0 COMPARATIVE VIEW OF 4.0 IN EUROPE nology specialist whose remote-con- IN THE MIDST OF trolled transformers have made quite a splash. Another is the Shengyang Ma- A TOUR DE FORCE chine Tool Group, which launched mass production of a new generation of intelli- Four clusters, four leaders – China does not yet make the cut. gent cloud-based machine tools in 2014. Third, governments, associations, RB Industry 4.0 universities, research organizations and Readiness Index other stakeholders must observe market 5 principles more closely. Here are a few

Germany suggestions: Belgium Finland The Chinese government could drive the development of industry standards, Sweden Denmark Ireland complementing this strategy by creating 4 Netherlands FRONTRUNNERS tax incentives to modernize industry with- POTENTIALISTS out distorting competition. Austria Industry associations could support UK companies by providing advanced train- France ing courses and promoting cross-industry 3 dialog regarding the implementation of Czech Republic Industry 4.0. TRADITIONALISTS Universities and research organiza- Slovakia Italy tions could work together more closely to Slovenia Spain Hungary come up with new and intelligent Industry 2 Estonia 4.0 solutions. Lithuania Portugal Industry 4.0 is nothing short of a cul- HESITATORS Poland ture change that will demand a veritable Croatia tour de force on China's part. China Bulgaria

1 1 2 3 4 5 Manufacturing as a % of GDP

While China warms to the idea of Industry 4.0, many industrialized countries in Europe have already moved on. The Roland Berger Industry 4.0 Readiness Index (see vertical axis) shows that the field is still patchy. On the one hand, we grouped the state of development in production processes and automation, employees' level of education and the intensity of innovation together under the heading "industrial excellence". On the other hand, the value added, the openness of the industry, innovation networks and digital maturity were also bundled together. Combining the evaluation of the individual scores determines a country's position in the "RB 4.0 Readiness Index" – from the hesitators to the traditionalists, from the potentialists to the frontrunners.

THINK ACT // COO INSIGHTS 39 INDUSTRY 4.0 CYBER- CRIME

The invisible threat

40 THINK ACT // COO INSIGHTS INDUSTRY 4.0 Spectacular security loopholes make daily cyber- threats appear to be the norm. Most pitfalls remain undetected. Yet companies can take action to defend themselves.

t the latest since the Stuxnet tent. Advances in the virtualization and threats – thanks to the revelations of Ed- worm attacked a production au- digitization of business processes, elec- ward Snowden, the debate about stolen tomation system in an Iranian tronic interaction in networks with sup- intellectual property in the context of in- nuclear facility in 2010, tradi- pliers and customers, and the consume- dustrial espi onage, and the role the Ational value chains have lost their cy- rization of IT – the tendency to follow internet has played in geopolitics (such as ber-innocence. We have a few things to habits of use that stem from the world of in the Ukraine crisis and the "Arab Spring"). say on the subject. personal smartphones and tablets – are As widely as these examples differ, they driving this development. have nevertheless prompted decision- COMPANIES' SECURITY Second, the public at large has be- makers around the world to put the topic IS AT RISK come more aware of existing weaknesses. of data security high on their agenda. We analyzed the associated problems in a Third, numerous web-based digital Three developments sparked off the cur- 2010 Roland Berger and SAP study of suc- business models have become estab- rent debate about data security. cess factors for cloud services in Europe. lished in relation to connected vehicles, First, traditional IT is permeating every Managers outside this community are like- e-commerce, e-health, e-energy and In business process to an ever greater ex- wise gradually becoming aware of the dustry 4.0, for example. Although tradi-

THINK ACT // COO INSIGHTS 41

PHOTO: F. SCHMIDT/FOTOLIA F. PHOTO: INDUSTRY 4.0 CYBER CRIME DATA SECURITY systems as necessary. The third thing CHECKLIST they must do is map out comprehensive and sustainable systems, processes and 1 spheres of responsibility. For those areas Analyze where and how you are that are currently unguarded, manage- exposed to THREATS. ment systems for data security must be 2 established or adjusted. Cultivate security FEWER DISRUPTIONS, AWARENESS. MORE PROFITS 3 Build security systems and processes with Preparing a business case for security is clearly defined RESPONSIBILITIES. not easy. Some threats – such as production outages – are comparatively 4 easy to quantify. Putting numbers on Verify your company's COMPLIANCE, other risks is much more difficult, how both internally and in collaboration with suppliers. ever, with the loss of human life due to 5 product defects topping the list. Yet damage to the company's reputation Change your organization's MINDSET. and/or its brand value is equally hard Nurture a philosophy that integrates security to pin down. Statutory and regulatory from the earliest stages of product design. compliance requirements are many and 6 varied, especially for top managers and governing bodies. It is therefore vital to Lead by EXAMPLE. strike a fine balance between robust quantitative analysis and qualitative management assessments of risks and their impact. As hard as it is to cost a business case for investments in data security, it is a worthwhile exercise. The tional security management is a mature principles and management tools. There true returns are measured in terms of discipline in commercial IT circles, these are three things businesses must do to minimized incidents and disruptions. digital business models still raise new institutionalize a high level of security in questions: Is enough being done in the their organization. The first is to gain a SIMPLE GUIDELINES development of connected vehicles to clear picture of the threats and weak- CAN HELP rule out unauthorized electronic access? nesses inherent in the value chain. We Are the manufacturers of aircraft, power advise companies to identify risks from A few pieces of guidance and advice to plants and production lines taking ade- two perspectives: from an end-to-end companies and their employees can quate precautions to ensure that embed- process view; and in light of all company's make a huge difference to data security. ded software components from third par- key assets, including intellectual property, Don't overdo the rules and procedures. ties are innocuous. Is companies' most proprietary process knowledge, physical Leave a balanced measure of flexibility valuable intellectual property really safe? and digital products and the principal between the needs of your operating components thereof. business and the requirement for data TOP MANAGEMENT Second, having achieved transpar security. Ultimately, even when faced with NEEDS TO RESPOND ency, firms must prioritize the need for potential threats, your company still has action. Above all, they must quickly set to be able to act quickly and flexibly on New digital lines of business often lack up initial solutions to deal with urgent the markets it serves. More security must clear security guidelines, organizational white spots, defining or adapting security not come at the expense of agility.

42 THINK ACT // COO INSIGHTS INDUSTRY 4.0

INTERVIEW JEAN BOTTI "Compa- nies have become more vulnerable"

JEAN BOTTI, Chief Technical of Airbus (CTO) Officer Group, even enlists tech-savvy youngsters to guard against security risks.

Monsieur Botti, Industry 4.0 means have to admit that you will never have to- priorities. We have improved the situation more and more interfaces to the out- tal security. We will never have 100 per- significantly and we have limited the level side world. That increases the threat to cent, bullet-proof production, and none of risk. security. How does Airbus Group deal of our competitors will either. Everyone How do you adapt to the threats? Within with this situation? Security is very im- has to ask themselves what price they are this enterprise, harmonized processes, portant. It is a critical factor to which we willing to pay for security. Our strategy is methods and tools lead to greater effi- give top priority. But if we are honest, we to identify the crown jewels and set ciency and security in aircraft develop-

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PHOTO: AIRBUS GROUP INDUSTRY 4.0

INTERVIEW JEAN BOTTI

ment and production. But also the data most of whom are SMEs. Further compa- requirements – France in particular, if it is exchange with our suppliers in the so- nies such as Liebherr Aviation have joined defense we are talking about. We have to called "extended enterprise" has to meet the hub, too. find sensitive answers to their questions. highest security standards. A recent survey said that companies At the same time, we also have to deal Which means? The first question is: How suffer from more than 120 successful with concrete threats day in, day out. do you get the data back and forth? How cyber-attacks a week. What is the fig- Regulation adds to the complexity, but we do you protect it? To answer this ques- ure for Airbus? We don't want to disclose have a clear strategy. The link between IT tion, the Airbus Group joined forces with that information. But no major company and process security on the one hand other big players in 2008: Thales, Das- will seriously claim to have been spared and product security on the other hand is sault and Safran. We called the project this kind of threat so far – except where vital for us. "BoostAeroSpace". the threats go undetected. Does that change the role of your sup- What was the project focus? The main And how do you protect yourself from pliers? We rely on very close relation- purpose was to set up a secure digital these threats? A year ago we put togeth- ships. Every supplier of software for pas- hub where we can exchange data on both er a cyber-security board, which I am senger aircraft now has a digital signature sourcing and engineering. That speeds up chairing, to protect our interests – our in and is part of our Aircraft Security Man- the deployment of electronic processes formation and products – as best we can. agement System. Irrespective of whether and tools from the OEM to our suppliers, All key stakeholders are represented on they deliver just a small piece of software this board. We also have the people in or any other part of the equipment for our charge of cyber-security at Airbus De- aircraft. fense and Space. That used to be a pure ly Do your suppliers differ in terms of IT topic, but it has become much broader security awareness? Not all suppliers "We now. Indeed, it ranks among the eight are like Safran or Rolls-Royce. Some most important goals for our company in don't have the money to guarantee no- 2014. We have set a clearly defined bud- gaps security for their own systems. That work get for security. is why we help SMEs to protect them- How much do you spend on security ev- selves, which is ultimately in our own in- together ery year? Believe me, it is a lot of money. terests. Hackers will always look for the And it is absolutely necessary. weak links. BoostAeroSpace provides Airbus Group is a European company SMEs with a level of security that is indis- with with many stakeholders. How do you pensable to us in a 4.0 setting. tackle the problem of security on an in Has the threat become more serious or top notch ternational level? To be frank, it is scar just more complex in recent years? It cely possible to please everybody. In the has become both more complex and US you have one federal government to more serious, because hackers are grow- experts. deal with. In Europe it is a bit more com- ing more intelligent, tricky and sophisti- plicated: There is Germany, there is cated all the time. Companies have be- That is France, the UK and Spain; and each gov- come more vulnerable, and that demands ernment has its own specific agenda. So a different approach to what we used to we don't have a unified structure within do in the past. extremely which we protect our data. We are always Who poses the greatest threat to you? having to respond to varying demands You read the newspapers the same as I from different countries. do. Some players are more vulnerable to helpful." Do you believe data security is driven product piracy and cyber-attacks than more by regulation or by concrete others. We used to see fairly simple at- threats? It is driven by both. Of course tacks on a small scale, but what we are we cannot ignore what our governments seeing today are threats on an enormous want. Authorities formulate very specific scale. We talk about an advanced per-

44 THINK ACT // COO INSIGHTS INDUSTRY 4.0 sters who help us recognize future threats – to anticipate them rather than merely react to them. That is especially important because airplanes have such a long life cycle. How do you make sure that you always keep your nose in front? Our people are highly connected, they are top-notch specialists and they know the hacker scene. It is a small world. Lots of experts work for us. They spend half of their time working on a certain product or for a certain divi- sion at our company. The other half they devote to attending prominent events in the USA, France, Germany, the UK and sistent threat, from outside. Attacks are sometimes even China. This was an im- A CTO IN often coordinated, concealed and come portant condition when we recruited from different directions. That makes it them. We normally look for experienced HIS FIELD difficult to generalize. specialists, but not in the field of cy- It must have come as a shock last year ber-security. Here, we look for younger THE when German security consultant Hugo people, because we need creativity more SECURITY Teso showed how easy it was to remote- than anything else. ARCHITECT ly attack an airplane's communication Do you coordinate with competitors to system. All he needed was a radio trans ward off criminal attacks? That's not JEAN BOTTI, born in 1957, master's mitter and some software he had bought easy. We have tried to agree on harmoni- degree and PhD in mechanical engineer- on eBay. It wasn't a shock. What he said zed security standards. We engage in in- ing, Toulouse/Paris, MBA in Michigan; was wrong, for several reasons. He was tensive dialog with our competitors, espe- Chief Technology Officer of the Airbus never able to take full control of an airpla- cially with regard to aircraft security. Every Group and member of the Airbus Group ne. However, the mere fact that he was a year, Airbus hosts an Aircraft Security User Executive Committee since 2006. Botti smart hacker with a pilot's license made Panel that is attended by various players in has previously worked with Renault, his scenario extremely credible, and we the industry. Future threats, common stan- General Motors and automotive supplier were obliged to react. dards, past experience, customary solu- Delphi in the USA and France. How? We have been working together tions are all discussed in this forum – with THE with top notch experts for more than ten out excluding competitors from anything. years. That is extremely helpful. The Air- We also participate in the Aviation Infor- NETWORK bus team in charge of aircraft security is mation Sharing Working Group, a US-led THE AIRBUS GROUP operates at always open to discussions about poten- initiative whose aim is to encourage indus- more than 170 locations worldwide, tial weaknesses. We have conclusively try and governments to share ideas on the employs around 140,000 people and has proven to the aviation safety authorities subject of data secur ity. machine maintenance hubs on five that everything is okay. I have every rea- And the outcomes? When it comes down continents. Airbus gives work to 35,000 son to trust in the work we do and the to the details, many companies keep suppliers on its domestic markets alone. competent people we have on board. We their cards close to their chest. So we first The volume of external delivery agree- are doing everything in our power. try to resolve our problems internally. ments – nearly 40 billion euros – equates The threats are changing constantly. Looking ahead, I see an urgent need for to almost two thirds of Airbus' revenues. How do you learn about new security us all to collaborate and strengthen each gaps? To give you just one example: We other. That is something we still need to work together with tech-savvy young ingrain in our culture.

THINK ACT // COO INSIGHTS 45

PHOTO: AIRBUS GROUP INDUSTRY 4.0 COO WORKSHOP

| ROLAND BERGER INDEX | What must companies do to boost their entrepreneurs. The four most important efficiency, quality and speed as they factors are infrastructure, processes, IS YOUR implement Industry 4.0? How can data traffic and work models. These managers tap their company's poten- factors enable us to calculate a com COMPANY tial? On top of its economic maturity pany-specific maturity index value index (see p. 39), Roland Berger Strategy highlight ing how all departments must READY FOR Consultants has now also prepared pull together. Our study is due out at INDUSTRY 4.0? an analytical index for managers and the beginning of 2015.

COMPANY ANALYSIS BASED ON ROLAND BERGER'S MATURITY MODEL FOR INDUSTRY 4.0 (generic model)

ELEMENT INDICATOR LEVEL 1 LEVEL 2 LEVEL 3 Industry 3.0, basic digital Maturity, but principles of Industry 4.0 implemented capabilities Industry 4.0 not implemented

INFRASTRUCTURE Sensor technology ●

Flexible production ● plant Use of precision ● engineering technology PROCESSES Production design ●

Planning and control ●

Logistics ●

Maintenance ●

DATA Internal data integration ●

External interfaces ●

WORK MODELS Flexible work force ●

Management models ●

46 THINK ACT // COO INSIGHTS INDUSTRY 4.0 COO WORKSHOP

77% | STRATEGY | ENGINEERING LEARNING FROM NETFLIX 41% Today's companies must make complex Western European SALES companies' sales and strategic decisions against a backdrop engineering footprint of unprecedented uncertainty. Digiti- zation, growing uncertainty about political regulation, the need to manage | ENGINEERING EFFICIENCY | emerging markets and the need for organizational agility are just some of More efficiency, please! the many imponderables. Charles As Western European companies en- for the mass market 3. Allowing an im- Edouard Bouée, CEO of Roland Berger large their footprint throughout the balance to arise between sales on do- Strategy Consultants, recommends a world, the question of how best to serve mestic markets (41%) and the personnel strategy that has proven its worth in local customer needs takes on new ur- expenses incurred in development in gency. Three typical mistakes are often these markets (77%). military contexts: light footprint man- made when entering a new market: Our "Engineering Efficiency 2014" study agement. It emphasizes agility, speed, 1. Developing products that are too outlines a roadmap to more marketable responsiveness and the efficient use complex for emerging countries 2. Fail- technologies and more customer-orient of resources. Ignore change and you ing to ensure that products are suitable ed products. risk falling into the "Kodak trap" of missing out on transformation. Draw- ing on the experience of champions such as Netflix (innovation), Haier (re- | TECHNOLOGY GROUPS | 712 organization) and P&G (collaboration), 2003–2013 GIANTS'END? the "Mastering 2020" study spells out seven key principles of adaptability. Change or die? HP is splitting its business, www. rbsc.eu/mastering2020 eBay is jettisoning Paypal, Facebook wants to be rid of its Messenger. Technology magazine BEYOND MAINSTREAM "Wired" concludes that the important thing is to focus on one thing and do it really well. 350 Mastering 2020: How light footprint companies dropped out of the Fortune 1000 management helps REVOLUTION Developing between 1973 and 1983. Between 2003 and new models prepare you for a 350 world of uncertainty 1973–1983 2013, the number was 712. The half-life of bu EVOLUTION Upgrading existing sinesses is declining. Agility is the order of the businesses

day, and is rewarded by investors in companies MASTERING 2020 How to get prepared for the VUCA world with big and small. Industry 4.0 creates conducive Light Footprint management conditions. FEBRUARY 2014

THINK ACT // COO INSIGHTS 47 INDUSTRY 4.0 | COST-CUTTING | Unexpected obstacles 36% 57% of firms rank the digital transformation What steps does a cost-cutting project as a strategic medium-term priority. Yet vs. only 36% have formalized a digital strategy. typically involve? What obstacles might you encounter? What are the success factors? Savings of up to 30% 57% are possible – thanks to standardiza tion, design changes, renegotiation Untapped growth potential: French companies have doubled their sales growth with suppliers and leaner production. by accelerating their digital transformation. Our concept can be mapped onto all x2 product phases.

PRODUCT Employees in the most digitally advanced FUNCTIONAL OPTIMIZATION companies are 50% more satisfied with • Product portfolio their working life than their peers at poorly • Functional scope 50% digitized firms. STANDARDIZATION • Simplification of design • Standardization of parts • Reasonable quality requirements Paradoxically, consumers evidence 59% greater digital maturity than companies. PURCHASING vs. 59% of French people shop online, but only 11% of French companies sell online. MATERIALS • More professional material purchasing • Dual sourcing 11% PRICE NEGOTIATIONS • Product cost benchmarking for The most digitally advanced companies are contract negotiations growing six times faster than firms with the lowest level of digital maturity. PROCESSES x6 ASSEMBLY • Simplification of processes based on product redesigns • Changes in process technology | DIGITAL TRANSFORMATION |

PRODUCTION • Changes to the production process NEW OPPORTUNITIES • Material substitution • Process reengineering FOR FRANCE SUPPLY CHAIN Commissioned by Google, a new study by Roland Berger France LOGISTICAL OPTIMIZATION assesses the economic and social potential of the digital • Simplification of logistics and transportation transformation. The publication was produced in collaboration • Optimization of both suppliers' and in-house inventories with Cap Digital, a digital economy industry association, • Localization of production facilities and is based on a survey of more than 500 French companies • Synergies across different development/production sites that each employ more than 50 people. www.rbsc.eu/opsradar www.rbsc.eu/digitransformation

48 THINK ACT // COO INSIGHTS INDUSTRY 4.0 COO WORKSHOP

| STAYING COMPETITIVE | Escaping from the commodity trap

When even complex products and ser- VERY EFFECTIVENESS/ VERY LEVER LOW LEVEL OF USE HIGH vices degenerate into effective commo dities, a company has fallen into the Differentiate products through innovation commodity trap. Scope for differentia- Add value to products with services tion is limited and competition is pri-

marily price-based. Innovation, quality Improve product and delivery quality and the business model are the three main rungs of the ladder to climb out Strategically realign the business model of the commodity trap. The biggest Step up target costing/design-to-cost discrepancy between the effectiveness of a lever and its application in practice Design a more flexible organization concerns the realignment of business models and target costing/design-to- Use marketing and sales tools cost. This study shows how firms can gain a fresh competitive advantage. Focus on special market segments www.rbsc.eu/commoditytrap Realign the company portfolio

Effectiveness Level of use

| E-LEARNING | ALL CHANGE SOOCs IN CORPORATE SPOCs Selective open online courses Small private online courses (Participants can be chosen based on prior qualifications and/or their employer, for example) LEARNING Online tuition technologies can help companies become more agile, adaptable and able to learn. The most important areas of application are not free mass course offerings ("MOOCs"), however, but personalized and individualized educational offerings that encourage lifelong TORQUEs MOOCs learning. The rules that govern the corporate learning Tiny open online courses Massive open online courses value chain are changing as silo mentalities that with definite restrictions, focusing thinks in terms of departments, business units or on quality and effectiveness individual enterprises are gradually torn down. www.rbsc.eu/corporatelearning

THINK ACT // COO INSIGHTS 49 INDUSTRY 4.0

FAMOUS LAST WORDS

MAN OR MACHINE: WHO WILL BE IN CHARGE OF PRODUCTION IN THE FUTURE? An essay by Andreas Neef

ndustry 4.0 is an industrial ecosystem, In a mature Industry 4.0 scenario, new trol risks. If there are problems at a suppli- the heart of which are intelligent soft- professions and training concepts will er, essential primary products can be ware systems that enable highly-effi- emerge. System architects are the "brains" automatically ordered from other providers cient and adaptive production through of Industry 4.0. They will combine tradi- using an industry platform. Production Iautonomous cyber-physical systems. The tional engineering skills with software ex- processes can then be kicked off there in shift to this new paradigm is forcing a cellence and the vision of a game design- real time. This will change relationships in change in people's role in the industrial er. They will create a framework and rules the industrial ecosystem. Just like social value chain. Where today technical exper- under which the self-organization of pro- networks have changed the social concept tise, experience, human judgment and dis- duction will take place. of friendship, relationships between com- cretion are mandatory even for highly auto- panies in Industry 4.0 will be more diverse, mated production processes, these skills CONFIGURATORS AND looser and volatile. Simultaneously, open- will hardly add any value at the point of CONTINUITY ENGINEERS ness in terms of cross-company collabora- production in the real-time logic of future tion and the integration of data across hyper-flexible production structures. Let us Configurators will use intelligent interfaces processes will be necessary to actually re- not deceive ourselves: As with every wave to adjust systems to local conditions, but alize value-creation potential. Significant of industrialization, Industry 4.0 will also without needing to tackle the complexity of spatial density and a diversity of indus- destroy jobs over the long term. the processes. They are the users of the tries, skills and company sizes provide the This time, however, it will be jobs that digital factory, who recognize errors and ideal setting for establishing such a highly require experience – skilled labor and mid- can adjust the parameters to the specific flexible production system. Europe is rela- dle management positions – that the ma- situation, but without having to exercise tively well positioned. From a global per- chines replace. This is because expertise, centralized control over the entire process spective, we can expect new production practical experience and the ability to in the traditional sense. Continuity engi- clusters to be formed not by industry ho- make sound operating decisions will be neers will be responsible for avoiding mogeneity, but by virtue of adaptability embedded in system logic itself. Sensory downtime and ensuring that value-adding and complementary competences in close technology and self-teaching software will processes don't stop, even if there are fail- physical proximity. The paradigm shift to permit cyber-physical systems to increas- ures. They will provide ad-hoc solutions to Industry 4.0 means the cards will be re- ingly improve their assessment of situa- minimize any damage from interconnected shuffled on all levels. tions, learn from them and then inde- risks and combat the threat of cascade ef- pendently optimize processes. For all the fects should any production stage crash. Andreas Neef is the Managing Partner of Z_punkt risks it poses to the labor market, this also Operating decisions in Industry 4.0 will The Foresight Company. A highly regarded management consultant, Neef is the author of a study enti- provides us with the opportunity to keep increasingly be made by the systems tled "Connected Reality 2025 – Die nächste Welle industrial value creation in Europe, despite themselves, not only because of the com- der digitalen Transformation" (The next wave of digi- a shortage of skilled professionals. plexity of data networking, but also to con- tal transformation). Download: www.z-punkt.de

50 THINK ACT // COO INSIGHTS

INDUSTRY 4.0 KIRCHNERILLUSTRATION: BEN SERVICE

PUBLISHING INFORMATION OUR DIGITAL PUBLICATIONS: PUBLISHERS Thomas Rinn / Max Blanchet STAY UP TO DATE! Senior Partners Roland Berger Strategy Consultants GmbH Sederanger 1 80538 Munich READ P.O. Box 40 21 49 OUR 80721 Munich ONLINE +49 89 9230-0 EDITION www.rolandberger.de ! RESPONSIBLE FOR CONTENT IN ACCORDANCE WITH GERMAN Our THINK ACT PRESS LAW app features Dr. Michael Zollenkop even more up- to-date info EDITORIAL ADVISORY BOARD Alexander Belderok Max Blanchet Emmanuel Bonnaud Roberto Crapelli Martin Erharter Jochen Gleisberg Philipp Grosse Kleimann Manfred Hader Dr. Bernhard Langefeld Per I. Nilsson Thomas Rinn Carsten Rossbach Didier Tshidimba Michel Vlasselaer Wu Qi

EDITORIAL TEAM Thomas Reinhold (Project Manager) Dr. Katherine Nölling (Chief Editor) Dirk Horstkötter, Andreas Lang THINK ACT HOW TO ACCESS DESIGN ONLINE THE THINK ACT APP Blasius Thätter (Art Director) Ludwig Engl, Damaris Zimmermann Like all our THINK ACT publications, this IPAD Susanne Nips (Graphic Editor) issue of COO INSIGHTS is available online Search for "Roland Berger" in the COPYRIGHT NOTICE at www.think-act.com. For users of mo- iTunes App Store and then click The articles in this magazine bile devices, our THINK ACT app lets you the "Free" button to download the are protected by copyright. access all online editions conveniently on THINK ACT app. All rights reserved. your tablet – in some cases including mul- DISCLAIMER timedia elements such as audio, video ANDROID The articles in this magazine do not and animated graphics, to keep you even Use Google Play to download our necessarily reflect the opinion of the more fully up to date. Our content is avail- publications to your tablet. Just search publisher. Do you have any questions for the editorial team? Are you able to you any place, any time, and at no for "Roland Berger" in the Play Store, interested in studies conducted by charge. Once you’ve downloaded it, you install the THINK ACT app – and enjoy Roland Berger Strategy Consultants? can also enjoy it offline. your read! Then please e-mail us at: [email protected] Published in November 2014